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Buying a House once in a life is a life-time decision for many of home buyers with the growing prices of the property and the high interest rate in the market. Thus, selection of right home loan becomes much more important before buying a house. Therefore, the decision of buying home depends to a great extent on the amount of Home Loan you can avail.
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Also Read: Check List Points When Buying a House
Before you decide, do keep these important things for before applying home loans as follows:
01. Apart from the interest to which people generally get tempted remember that the bank recover many charges and fees, in name of processing fee, application fee, admission fee, valuation fee, stamp duty, advocate fee etc. One has to calculate all such onetime cost at the time of obtaining loan as well as the interest cost over a period of time and then workout the best possible offer. Sometimes this onetime cost may be working out to be 1 to 3% of amount of loan.
02. For working out the best possible offer one must contact minimum 2 to 3 nationalized banks, Housing finance company and assess all above costs.
03. The applicable rate of interest, norms of financing, general rules and regulations as per the guidelines of Reserve bank are also available on the website of the bank and should be checked before obtaining loan.
04. Many private banks recover some huge charges apart from interest. This need clarification in advance.
05. Many banks may deny you housing loan after processing the application while you are entitled to know that why you are denied loan. You must ascertain in advance whether the processing fee shall be refundable or forfeited in case of non approval of loan.
06. Also check whether bank has power to increase rate of interest half way?
07. You must get back all original documents that you might have given to the bank while applying except conveyance deed which you may be mortgaging.
08. Fill up the form as well as loan agreement after reading thoroughly. Don’t rely on any agent and never sign anything on blank paper though bank will ask to sign all the blank agreements.
09. Read all the terms of conditions very carefully before signing.
10. There are two types of interest rate applied. One is “fixed rate interest” and another is “floating rate interest”. You must clarify, understand and choose the best offer. You may consult your Chartered Accountant / Lawyer as this is an important issue.
11. Ascertain whether bank has right to make changes in terms of conditions after signing the agreement or disbursing the full loan amount.
12. Get the repayment schedule from the bank i.e. No. of years, Nos. of installments per year, No. of years within which the loan has to be repaid. Amount of installments and break-up of interest as well as original capital paid as with this only you will be able to claim benefits under 80 CC while filing income tax return.
13. Many banks charge pre-payment charges, if you pay the loan before your scheduled time limit. This clarification has to be made well in advance.
14. Also clarify the penal interest that you might have to pay in case of delay in payment and bonus, if any in case of regular payments.
15. Check your bank statements every quarterly regularly.
16. Many banks also insist for life insurance policy equal to the amount of loan in the name of buyer. Hence if under any circumstances the buyer dies, the bank can recover the outstanding from the insurance company and the heirs would be free from botheration for repayment of loan.
17. Many banks now a day’s do business as insurance company also. They will therefore try to have insurance for all the damages like fire, earthquake, flood etc. check your needs.
18. Check the insurance premium in such cases and compare with the premium charged in the market by other companies.